One of the many-cited contributors to the failure of the private-label RMBS market to rebound from its crisis-driven lows is contractual ambiguity, concern around the inviolability of the contract, and a general lack of trust that trust cash flows will be allocated as dictated by the transaction documents. The CFPB v NCSLT case has aggravated these concerns among market participants, and without intervention, the lack of confidence might extend to other asset classes such as credit cards, student loans, and auto loans.

While neither appropriate nor acceptable, the extra-legal re-ordering of legacy RMBS contracts, in retrospect, can at least be attributed to a crisis situation, the Great Financial Crisis. That is not the case in this NCSLT matter.

At the heart of our concerns is the rule of law as it applies to negotiated contracts – a bedrock tenet to the stability of financial markets. The ramifications of this lawsuit will have a chilling effect on the broader securitization market. Through this task force, SFA will continue our effort to protect the sanctity of the contractual agreements in one of our longest running cases, CFPB v. National Collegiate Student Loan Trusts (NCSLT).